LFI Insight: New-issue loan spreads widen and covenants tighten in October amid surging supply
Soaring supply took some of the heat off the loan market in October as priced institutional volume net of associated repayments jumped to a six-month high of $42.3 billion from $27.4 billion in September, according to LevFin Insights. On the other side of the technical ledger, capital formation remained robust but failed to keep pace with supply.
Secondary Prices: The average bid of the Credit Suisse Leveraged Loan Index climbed 0.11 points to 98.53 on Oct. 31 from 98.42 on Sept. 30.?
Par-Plus Loans/Repricings: The share of CS Index loans bid at par or better increased to 23.2% on Oct. 31 from 22.7% at the end of Sept.
Flex: Muscular supply allowed managers to play a bit more offense in October.?
New-issue Clearing Spreads: With flexes less tilted to borrowers in October, the average clearing spread (with LIBOR floor benefit) of single B loans inched up L+464 from a three-month low of L+451 in September.
Covenant Terms: The average Documentation Score of all loans in Covenant Review’s sample improved to 3.87 for all loans and 4.01 for PE-back loans in October?
Widespread acceptance of MFN sunsets, which has been 2021’s signature covenant theme, was mixed in October.
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